Now, single-brand retail companies with stores can sell online

Any brand entering India will have to apply for a licence to set up storesRuchika Chitravanshi | ET Bureau | November 21, 2015, 09:08 IST

Picture source: ThinkStockSingle-brand retail companies wanting to sell on ecommerce platforms will be able to do so only if they have a licence for setting up physical outlets, according to revised foreign direct investment regulations.

Any brand entering India will have to apply for a licence to set up stores and once it secures the licence, it can sell products online through the automatic route.

Single-brand companies were until now not allowed to do retail trading in any form by means of ecommerce. “We have clearly stated that only companies with the single-brand licence can also do ecommerce directly in India.

The licence itself is only for physical outlets,” a senior government official told ET. Last week, the Department of Industrial Policy and Promotion (DIPP) announced a slew of FDI reforms across 15 sectors. A press note notifying these changes in legal parlance is being finalised and will be released soon by the DIPP.

“There was no reason why brands, which are selling through their stores, be restricted from ecommerce platform. Government’s intention was to make these norms easier for such companies not to let them apply for ecommerce directly,” said Paresh Parekh, tax partner at EY. At present, single-brand retail allows 49% FDI under the automatic route, which can go up to 100% with government approval.

Besides, the ecommerce platform has been thrown open to all the companies that undertake manufacturing in India apart from selling through wholesale or retail without the government approval.

To give high-end single-brand entities easier access to India, the government has also said that “in case of state of the art and cutting edge technology, sourcing norms can be relaxed subject to government approval”.

The revised FDI guidelines say that sourcing of 30% of the value of goods purchased would be “reckoned from the opening of the first store”.